Assessment report for 2022 by the Audit Committee of the City of Espoo

Arviointikertomus 2022 (Assessment report for 2022) (in Finnish)

The development of Espoo’s economy and operating environment is affected not only by global uncertainty but also issues such as sustainable development, digitalisation, urbanisation, population ageing, the development of the job situation, and the integration of immigrants. Espoo’s population growth was at a record high level of 2.7 per cent and higher than in any other large city. Rapid population growth has resulted in a significant increase in the need for services and investments. At the end of 2022, the unemployed accounted for 8.7 per cent of the labour force, which is one percentage point higher than the level before the coronavirus pandemic.

The performance targets must steer the city in the direction outlined by the City Council and must be both challenging and effective. According to the Audit Committee’s assessment, less than half of the performance targets set for the city, public utilities and group entities were reached. Based on the financial statement, it has been difficult to reach the pre-coronavirus level in terms of service provision and employment. Targets related to children’s and young people’s wellbeing and recreational activities have not been met either. At the same time, cost-effectiveness and economic adjustments continue to pose challenges. The Audit Committee considers it good practice that the City Board requested that the measures to promote the achievement of the performance targets set for this year be presented in connection with the first interim report for 2023.

The city’s annual contribution margin for 2022 was EUR 347 million and the financial result was EUR 244.8 million. This result was affected by one-off items, such as the selling of Kiinteistö Oy Espoon sairaala (Espoo Hospital property), and also by the better-than-expected development of tax revenue. Espoo is one of the net contributors in the central government transfer system, and last year, EUR 176.2 million was paid to other municipalities as central government transfers based on tax revenue. As a result of the health and social services reform, the share of tax revenue in the city’s revenue base will decrease significantly and the share of central government transfers will increase. As of 2023, Espoo must be able to adapt the financing of investments and loan repayments to a reduced revenue base in order to secure basic services for residents.

The availability of labour has decreased and the exit turnover of staff has increased, making it more difficult for the city to organise high-quality basic services. To attract and retain staff, city sectors must continue to develop their operations.

The city’s service provision resources focused on remedying the effects of the coronavirus pandemic and preparing for the health and social services reform. After the health and social services reform, Espoo remains responsible for wellbeing promotion, i.e. taking measures to improve its residents’ health and wellbeing. Espoo must make sure to eliminate any overlapping functions between the city and the wellbeing services county that would further strain the city’s economy. In autumn 2022, Espoo and the Western Uusimaa Wellbeing Services County signed an agreement on the transfer of service provision to safeguard the provision of high-quality and timely services for residents and the status of personnel.  The Espoo City Council decided that, following the coronavirus pandemic and the health and social services reform, the city must take special measures to ensure the wellbeing of children and young people; this was set as a performance target for 2022. In order to support the wellbeing of children and young people in Espoo, the city must cooperate with the wellbeing services county, develop its services, and provide them in a timely manner.

The assessment of the Audit Committee is based on an assessment plan that covers the City Council term as well as an annual assessment programme. The assessment report was submitted to the Chair of the City Council on 4 May 2023. For further information, please contact Paula Viljakainen, Chair of the Audit Committee, tel. +358 50 5727497.